Nonprofits are charitable enterprises whose mission is to serve a public good. Nonprofits can range from food charities and homeless shelters to educational providers and churches. They also include trade associations and recreational clubs. Even some hospitals are not-for-profit. Two ways that a nonprofit secures funding for its operations are through the receipt of grants and the generation of income on certain allowable goods and services sold.

Funding Sources

Many nonprofits with longevity rely on a wide variety of types and sources of funding. This broad funding ensures that if one source or type of funding drops drastically, a nonprofit has time to cultivate its other funding before it enters into financial distress. Grants from various federal, state, county and city agencies or private or corporate foundations make up the majority of funding for a number of nonprofits. Many other not-for-profits primarily rely on donations from individuals and corporations.

Grants

Nonprofits can apply for grants ranging in size from $100 to millions of dollars, depending on the size of the organization and the number of people it serves. Some foundations and government agencies offer start-up grants to organizations that address a high need or high attention area. Grants span from monies provided to support affordable housing to arts training to financial counseling or health research. Nonprofits must research their service areas to determine what grants exist and the process for obtaining them.

More on Grants

Smaller grants may have an abbreviated application process. Many larger grants require a detailed application that includes but is not limited to the nonprofit's mission, impact, programs, program management team, financials, and proposed use of grant funds. For example, the Housing and Development Agency offers a number of grants directly or through funding it provides to states and municipalities for housing initiatives. These grants fund housing counseling or housing assistance. The grant applications may range from five pages to 50.

Sale of Products

Some nonprofits sell products and services to generate funding for their programs. A nonprofit may receive donated products that they sell. Goodwill, the Salvation Army and smaller nonprofit thrift stores are examples. The stores typically provide on-the-job training for people in certain income brackets, and the funds generated support in-class training and other programs. Other nonprofits actually manufacture products to sell. Nonprofit cooperatives that sell local or international artisans' goods are an example.

Sale of Services

Some nonprofits sell services. When nonprofits offer car washes for $10, they are selling a service. A group of accountants might do small-business tax returns on Saturday, pro bono, on behalf of a nonprofit that is charging a set fee to the business owners who are getting their taxes done. The nonprofit offering the accounting services is selling a service to generate operating income, with the voluntary help of the accountants. In addition to utilizing volunteers, nonprofits also sell services through employees. Nonprofit financial and credit counseling agencies typically charge customers for their services on a sliding scale. The fees generated cover some of the nonprofit's operating costs.

References

About the Author

Tiffany C. Wright has been writing since 2007. She is a business owner, interim CEO and author of "Solving the Capital Equation: Financing Solutions for Small Businesses." Wright has helped companies obtain more than $31 million in financing. She holds a master's degree in finance and entrepreneurial management from the Wharton School of the University of Pennsylvania.